Its budget season in Washington, and a steady stream
of State and Defense Department officials have been
making the trip to Capitol Hill to defend the
administrations $13.3 billion request for foreign
operationssecurity and development assistance to
some 126 countries and a dozen regional
organizationsfor fiscal year 1998. The current
Congress is unlikely to support this request, which is
$1.2 billion more than last years appropriation. (For comparison to the FY97 appropriated
levels, see ASM No. 33 p. 4).

At more than $6.1 billion, security assistance
comprises nearly one-half of this years foreign
operations request. The administrations proposed funding
levels for these programs are summarized below. (Note:
security assistance programs funded through the
Department of Defense budget are not included here.)

FY 1998
Request for Security Assistance

$6,132,250,000

Foreign Military
Financing

$3,340,250,000

Economic Support
Fund

$2,343,000,000

Voluntary
Peacekeeping Activities

$90,000,000

War Reserve
Stockpiles (Thailand, Korea)

$60,000,000

International
Military and Education Training

$50,000,000

International
Narcotics Control

$230,000,000

Anti-terrorism
Assistance

$19,000,000

Foreign Military Financing

The administration is seeking just over $3.3 billion
for the Foreign Military Financing (FMF) program, which
underwrites the purchase of U.S. weapons and services.
The majority of FMF is provided as grant aid, with Israel
and Egypt receiving 90 percent of the total.

Israeli FMF will support the procurement of F-15E
bombers, SAAR corvettes, and upgrades of Apache
attack helicopters, and Blackhawk utility/troop
transport helicopters. Egypt will use its FMF to continue
buying tanks, F-16 fighter jets, Apache attack
helicopters, and frigates. Rounding out arms aid to the
Middle East, Jordans allotment will allow it to
complete the no-cost/low-cost lease of a squadron of F-16
fighter jets.

Also included in the administrations request are
$66 million to underwrite $700 million in loans for
weapons purchases. The budget requests $46 million to
underwrite loans for arms purchases by Greece and Turkey.
As has become customary, this aid will be provided in a
7:10 ratio ($122.3 million of loans for Greece: $175
million for Turkey), in order to maintain some parity in
the two nations on-going arms race.

The Clinton Administration has targeted Central Europe
for the bulk of the remaining money in order to
facilitate the expansion of NATO and sustain its a
Partnership for Peace activities. According to Secretary
of Defense William Cohen, "The NATO enlargement
process makes it essential that we fund the program at a
level sufficient to make the armed forces of the earliest
prospective NATO members [Czech Republic, Hungary, and
Poland] truly interoperable with NATO, while helping the
other partner countries progress."

Afghanistan, Angola, Cambodia, Laos, Eritrea,
Ethiopia, Honduras, Mozambique, Namibia, Nicaragua, and
Rwanda are slated under the request to receive $15
million in FMF to procure equipment and services for the
removal of landmines.

The administration is also seeking $7 million in FMF
for a new Enhanced Peacekeeping Initiative. According to
budget documents, this program would complement the
International Military and Education Training (IMET)
program, Department of Defense joint exercises, and
giveaways of "Excess Defense Articles," in
order to increase peacekeeping readiness and
"capabilities of countries which have demonstrated
significant potential for greater contributions to
international peacekeeping operations." The program
is targeted toward South Asian countries, which provide
the majority of manpower for the UNs peacekeeping
missions around the world.

Foreign
Military Financing

$3,340,250,000

Grants

Israel

$1,800,000,000

Egypt

$1,300,000,000

Jordan

$45,000,000

Central/East
Europe/Former Soviet

$70,000,000

East Africa
(Ethiopia, Eritrea, Uganda)

$10,000,000

Caribbean countries

$3,000,000

Cambodia

$1,000,000

Loans

Greece

$12,850,000

(to underwrite $122.5 million of
loans)

Turkey

$33,150,000

(to underwrite $175 million of
loans)

Central
Europe

$20,000,000

(to underwrite $402 million of
loans)

Enhanced Int'l
Peacekeeping Initiative

$7,000,000

Demining

$15,000,000

Administrative Costs

$23,250,000

Economic Support Fund

The administration is seeking nearly $2.5 billion in
Economic Support Fund (ESF) grants. Some of this money is
not targeted for military programs, but ESF aid to
Israel, Egypt and Turkey has historically been considered
"security assistance," since it is provided out
of strategic considerations rather than development
needs. In fact, Israel's annual $1.2 billion ESF grant is
explicitly provided to allow repayment of past military
debt owed to the United States.

The International Criminal Investigative Training
Assistance Program which is administered through the
Justice Department though funded by ESFtargets
Latin American and Caribbean countries in transition to
democracy, and seeks to strengthen their civilian police
institutions and investigative abilities. While much of
the $10 million request will be dedicated to training and
infrastructure, some of it will finance exports of police
equipment, including guns and ammunition.

The administration has also requested authorization of
a new Human Rights and Democracy Fund. The State
Departments Bureau of Democracy, Human Rights, and
Labor is seeking (a scant) $8 million, so that the United
States will have a dedicated funding source to
"respond to conflicts, human rights emergencies, and
implementation requirements of international
agreements."

Economic
Support Fund

$2,497,600,000

comprising in
part:

Israel

$1,200,000,000

Egypt

$815,000,000

Turkey

$50,000,000

Haiti

$70,000,000

Jordan

$25,000,000

Lebanon

$12,000,000

Cambodia

$37,000,000

International
Criminal Justice

$10,000,000

Human Rights and
Democracy Fund

$8,000,000

International Narcotics and Law Enforcement

The State Department has requested $230 million to
provide materials and supplies (including weapons) and
training to countries (principally Bolivia, Colombia,
Mexico and Peru) to fight illicit drug trafficking,
terrorism, and international crime. Nearly all of this
funding is for anti-narcotics programs which promote law
enforcement, institution building, and economic
incentives for crop eradication.

The "systems support and upgrade" category
refers to the State Departments anti-narcotics air
force, surveillance and transport planes used principally
by Latin American countries to combat drug-trafficking.
This years request of $17 million is a near
tripling of the fiscal year 1997 level. The funding will
provide support for C-26 aircraft, underwrite an airborne
surveillance initiative, refurbish OV-10 Bronco surveillance
aircraft, and upgrade UH-1H Huey utility/
transport helicopters.

Int'l
Narcotics and Law Enforcement

$230,000,000

Narcotics Programs

$214,000,000

Asia/Africa/Europe

$10,500,000

Latin America

$132,700,000

International
Organizations

$7,000,000

Interregional
Aviation Support

$32,000,000

Law Enforcement
Training

$7,000,000

Systems Support and
Upgrades

$17,000,000

Program Development
and Support

$7,800,000

Anti-crime Programs

$16,000,000

International Military Education and Training

The administration wants $50 million for the training
of more than 7,000 members of 120 foreign militaries, a
significant increase from FY97 levels. At House and
Senate foreign aid hearings, State and Defense Department
officials were effusive in their praise of the program,
with Secretary of Defense Cohen calling IMET "our
single most cost-effective security assistance
program."

Members of Congress, however, had a variety of
questions about the program, starting with its $50
million price-tag. Most Congressional concern, however,
was reserved for the proposed controversial
"extended-IMET" for Indonesia. The
administration assured Congress that the main component
of this program is training in human rights and
civil-military relations, while IMET generally involves
training on U.S. weapons systems.

Many of the governments to which the administration is
proposing to provide IMET are recognized by the State
Department as having serious human rights abuse problems
(e.g., Colombia, Egypt, Indonesia, Mexico, Morocco, and
Turkey). The funding request for individual countries is
listed on the next page, with the number of soldiers and
others to be trained in parentheses.

The Congressional Budget Office (CBO) recently
identified dozens of programs that could be cut from the
discretionary (non-mandatory) budget for savings. Among
CBOs suggestions are several that would reduce or
eliminate subsidies for weapons exports.

The Budget Office suggests a policy of recovering the
full costs of government-negotiated Foreign Military
Sales (FMS) by reversing recent changes in U.S. laws and
regulations that have created several arms sales
subsidies. It would reinstate a "recoupment"
fee on all FMS to recover taxpayer-funded weapons
research and development costs (see ASM No. 33, p. 3) and
require that a surcharge be included in the price of the
sales contract to cover the full cost of civilian and
military personnel working on FMS. CBO points out that
AU.S. defense industries have significant advantages over
their foreign competitors and thus should not need
additional subsidies to attract sales." CBO
estimates that such a plan would return $95 million to
the U.S. Treasury in 1998 and $850 million over five
years.

A second recommendation calls for a reduction in
security assistance (Foreign Military Financing and
Economic Support Fund), particularly that provided to
Israel and Egypt (see p. 1). Under the CBOs
proposal, $475 million of Israels annual $1.8
billion in military aid would be phased out over a
four-year period. (Israel is currently permitted to use
$475 million of its annual aid allotment to procure arms
directly from its own arms industry.) Egyptian aid would
be cut proportionally. In support of these cuts, CBO
cites the long-term build-up of arsenals by each country
during the past generation, declining defense budgets in
each country, Israels high-income economy (as
measured by World Bank standards), and the apparent
inability of Egypt to wisely spend the funds received.
This proposal would reduce outlays by $3.3 billion over
five years.

Source:Reducing the Deficit: Spending and
Revenue Options, A report to the Senate and House
Committees on Budget (Washington: U.S. Government
Printing Office, March 1997), 426 pp.

Since last September the administration has
given away (or stated its intention to give away) $154
million of military equipment through emergency
"drawdowns" of Pentagon stocks. This assistance
is in addition to appropriated military aid and to
giveaways of Pentagon surplus through the "Excess
Defense Article" program (see ASM No. 33 p. 2). For
each of the countries or organizations listed below, the
President made a determination that "an unforseen
emergency exists that requires immediate military
assistance." Military equipment was drawn down
principally to support multinational peacekeeping or
counter-narcotics efforts.

According to the Department of Defense, helping U.S.
arms manufacturers ply their wares is a matter of
national security, though An enhancing defense equipment
sales opportunities is a clear Aside benefit. The DOD has
recently certified that marketing U.S. weapons at arms
bazaars in Singapore, Australia, the United Arab
Emirates, and France is as in the national security
interest. Since 1992 this justification is required
whenever the Pentagon seeks to use public money to
display weapons at overseas arms bazaars. The Pentagon
estimates that the cost of participating in these shows
is $1.4 million.

The DODs first show of the year was the Defense
Asia >97 International Trade Exhibition, held in
Singapore during 15-17 January. The USS Blue Ridge
and its personnel were on display in order to A
demonstrate our commitment to the security of the region
and contribute to U.S. foreign policy and defense
cooperation objectives," like promoting U.S. access
to regional military and port facilities and furthering
military-to-military contacts.

Participation in February at an arms bazaar in
Melbourne, Australia was also necessary, according to the
Department of Defense, in order to show the United
States unflagging military commitment to the
region. The U.S. Air Force provided two B-1B bombers,
three F-16 Falcon fighter jets, and a Super
Cobra attack helicopter.

The most recent chance for the Defense Department to
help out came in March at the International Defense
Exhibition (IDEX >97) in the United Arab Emirates. The
Pentagon threw its full support behind Lockheed Martin in
its effort to sell 80 new "enhanced" F-16
fighter jets to the UAE, but assured Congress that its
participation at IDEX "will not result in sales of
U.S. equipment which are qualitatively or quantitatively
destabilizing to the region." Hughes, Raytheon,
McDonnell Douglas, General Dynamics, and Sikorsky also
benefited from the Pentagons assistance. The next
stop on the Pentagons arms sales tour is the city
of love, for the Paris Air Show, 15-22 June.

The Department of Defense recently notified Congress
that, as of the October 1996, thirty-four countries owed
the United States $14 billion in military loans. The
outstanding loans, some of which date back to the 1970s,
had been provided to finance weapons purchases. The
largest debtor nations are close allies Greece ($2.8
billion), Turkey ($3.2 billion), and Israel ($6 billion).
Several states (principally Liberia, Somalia, Sudan, and
Zaire) are $245 million in arrears, and the U.S.
government will likely write this debt off at some point.
Many others had rescheduled their debt, meaning that
default on repayment was imminent.

These loans are separate from the Defense Export Loan
Guarantee (DELG) program established last year (see ASM
No. 33 p. 2). Under that program, the Pentagon can
guarantee up to $15 billion in new private sector loans
to underwrite the sale or lease of U.S. weapons or
services to eligible nations. Government guarantees mean
that U.S. taxpayers will be liable for 100 percent
repayment of the principal and interest should a nation
default.

Source: Report to Congress on status of DOD
guaranteed and DOD direct loans as of 30 September 1996

In the first three months of 1997 the Clinton
Administration notified Congress of the following
proposed government-negotiated Foreign Military Sales
(FMS) agreements, export licenses for industry-negotiated
Direct Commercial Sales (DCS), leases of equipment, and
reduced price or free excess defense article (EDA)
transfers to developing countries. The Arms Export
Control Act requires only that the administration notify
Congress of FMS and DCS valued at $14 million or more.
Sales below that threshold are not recorded here.
Congress has 30 days to stop proposed FMS agreements or
DCS licenses from going forward (15 days for NATO members
and major non-NATO allies). To block a sale, a two-thirds
majority in both houses of Congress must pass a
resolution of disapproval. None of the following sales
were challenged.

Export Administration Act of 1996
[H.R. 361] (hearing before the Subcommittee on
International Finance of the Senate Banking, Housing, and
Urban Affairs Committee, 31 July 1996), Washington: U.S.
Government Printing Office, 1997.

Export Controls: Change in Export
Licensing Jurisdiction for Two Sensitive Dual-Use Items,
U.S. General Accounting Office (report NSIAD-97-24),
January 1997.

Foreign Military Financing of Direct
Commercial Contracts for Israel and Israeli Use of
Offshore Procurement Funds, Department of Defense,
Office of the Inspector General, reports no. 97-028 and
97-029, 22 November 1996.

Fourth Annual Report of the Trade
Promotion Coordinating Committee 1996 (hearing before
the Subcommittee on International Finance of the Senate
Banking Committee, 25 Sept. 1996), Washington: U.S.
Government Printing Office, 1997 (contains sections on
military offsets and bribery).

Legislation on Foreign Relations
through 1996 (joint committee print of Committees on
International Relations and Foreign Relations of the
House and Senate), Vol. I-A, November 1996 (contains up
to date amended copies of Arms Export Control Act and
Foreign Assist. Act, the two principle laws governing
arms exports/military assistance) Vol. I-B, January 1997.
Vol. II, March 1997.

Reducing the Deficit: Spending and
Revenue Options (A Report to the Senate and House
Committees on the Budget), Congressional Budget Office,
Washington: U.S. Government Printing Office, March 1997.

Security in Northeast Asia: From
Okinawa to the DMZ (hearing before the Subcommittee
on Asia and the Pacific of the House International
Relations Committee, 17 April 1996), Washington: U.S.
Government Printing Office, 1996.

Terrorist Attack against United
States Military Forces in Dhahran, Saudi Arabia
(hearing before the House National Security Committee, 18
Sept. 1996), Washington: U.S. Government Printing Office,
1997.

United States Policy toward Iraq
(hearing before the House National Security Committee, 26
Sept.1996), Washington: U.S. Government Printing Office,
1997.

U.S. Role in Iranian Arms Transfers
to Bosnia and Croatia (business meeting and hearing
before the House International Relations Committee, 8
& 30 May 1996), Washington: U.S. Government Printing
Office, 1996.